This paper – which can be found here – focuses on the relationship between trade and competition, and particularly on how the (apparently deceased, now revived) Trans-Pacific Partnership (TPP) imposes new rules on State-Owned Enterprises.

It is structured as follows:

Part II reviews how competition policy has historically figured in trade agreements. It contains an overview of the relationship between competition and international trade rules – in the Havana Charter, GATT and the WTO. This section also discusses how both competition and international trade law share the objective of enhancing economic efficiency and consumer welfare through trade liberalization and open markets. As a result, competition law is important for successful trade liberalisation, and to prevent anticompetitive and collusive conduct between businesses and governments that, from an international trade law perspective, amount to a form of non-tariff barrier that hinders access to markets by foreign competitors. After reviewing the main international trade law treaties, the author concludes that current rules fail to adequately regulate SOEs.

Part III examines the principle of “competitive neutrality”, which seeks to ensure that, in situations where public and private enterprises compete, that competition occurs on a level-playing field. The author maps out the origins of this concept in the Australian Hilmer Review, before engaging with our work (OECD) on the topic.

Part IV reviews the TPP’s chapters on ‘Competition and SOEs’. The Competition Policy chapter deals mainly with the implementation of national competition laws by national authorities. Its focus is on procedural fairness and on cooperation between signatories. Importantly, these provisions are somewhat toothless since they are not subject to dispute settlement procedures. The SOE chapter, on the other hand, is much more detailed and contains binding provisions subject to dispute settlement procedures. The Treaty allows member states to complain about SOEs that “are not operated via market-based financial decisions pertinent to the relevant industry or business”, and seeks to ensure that member states do not engage in discriminatory treatment regarding goods and services. Furthermore, the TPP prohibits non-commercial assistance to SOEs  – i.e. “assistance to a state-owned enterprise by virtue of that state-owned enterprise’s government ownership or control”.

Lastly, Part V concludes. It finds that: “The significance and value of the SOE rules in the TPP lie in the revolutionary attempt to incorporate competition principles into trade rules through integration of rules that discipline anti-competitive practices and government subsidization that distort competition in trade and investment”; and that the rules on SOEs in the TPP seem to be a ‘qualified’ success from a competition policy perspective, at least inasmuch as the treaty adopts a principle of “competitive neutrality” and develops binding rules in this respect.

Comment:

While much of the article is busy discussing minutae of international trade law – which are unlikely to be of much interest to readers of this email – this article is nonetheless likely to be of interest for anyone who wants to better understand the interface between competition and international trade law. It is also a good read for those who want to learn about the impact of international trade treaties – and particularly regional trade agreements such as the TPP – on competition law and policy.

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